Last Updated:December 17, 2025, 18:59 IST

Sebi approves new mutual fund and stockbroker rules to clearly show all costs to investors, cut hidden charges, revise brokerage limits and modernise trading and compliance norms.

Sebi Board Meet Outcome December 2025: The Securities and Exchange Board of India (Sebi) on Wednesday approved a sweeping overhaul of regulations governing mutual funds and stockbrokers, clearing long-pending reforms aimed at improving cost transparency for investors, modernising market practices and simplifying compliance. The board approved the new Sebi (Mutual Funds) Regulations, 2026, replacing the nearly three-decade-old 1996 framework, and also cleared a comprehensive revamp of stockbroker regulations through the Sebi (Stock Brokers) Regulations, 2025.

Mutual Fund Regulations Revamped to Improve Cost Transparency

The markets regulator cleared a proposal to enhance mutual fund transparency by breaking down total expense ratio (TER), said a release. This is aimed at reducing investor confusion and ensuring greater transparency in costs.

A key change involves the exclusion of statutory levies, including securities transaction tax (STT), commodities transaction tax (CTT), GST, stamp duty, and Sebi and exchange fees, from the TER.

Under the new framework, statutory levies will be charged on actuals over and above the base expense ratio (BER), with TER now comprising the BER, brokerage and statutory or regulatory levies.

Sebi also removed the additional 5 basis points expense allowance linked to exit loads.

The regulator also reduced BER limits across several categories, including index funds and ETFs to 0.9% from 1.0%, liquid-scheme-based fund of funds to 0.9%, and close-ended equity schemes to 1% from 1.25%.

Brokerage Caps Revised

Sebi also reduced the cap on brokerage paid by mutual funds for equity cash transactions to 6 basis points, against the current mutual funds pay brokerage of up to 12 bps for equity transactions. It is, however, higher from the previously proposed 2 bps, after the industry feedback that a sharp cut might affect fund managers’ ability to execute trades effectively.

Brokerage rates for derivative mutual fund deals have also been revised to 2 basis points from 1 basis point, exclusive of statutory levies.

Performance-Linked Expenses Allowed

Sebi has allowed performance-linked expense structures for certain schemes, aligning mutual fund regulations more closely with alternative investment fund (AIF) frameworks, while maintaining safeguards to protect investors.

Mutual Fund Rules Shortened, Simplified

While announcing the decisions, Sebi Chairman Tuhin Kanta Pandey said the new regulations significantly reduce complexity and improve clarity. “There has also been a significant reduction in length of approximately 44%, from 162 pages to 88 pages. The word count has been reduced by about 54%, from nearly 67,000 words in the current regulations to around 31,000 words in the new regulations. Key highlights include improved clarity on statutory levies and expense ratio limits, which are now referred to as the Base Expense Ratio,” Pandey said.

Sebi had released a detailed consultation paper on October 28 proposing a revamp of the TER framework, citing concerns that the existing regime masked actual costs borne by investors and embedded statutory levies within fund expenses.

Stockbroker Regulations Modernised

The SEBI board also approved a comprehensive revamp of the stockbroker regulatory framework, replacing the SEBI (Stock Brokers) Regulations, 1992 with the SEBI (Stock Brokers) Regulations, 2025.

The new framework introduces a formal definition of algorithmic trading, clearer norms for proprietary trading, and a regulatory structure for execution-only platforms (EOPs) facilitating direct mutual fund transactions. Key definitions — including clearing member, professional clearing member, proprietary trading member, designated director and proprietary trading — have been updated to reflect current market practices.

The regulations consolidate provisions previously scattered across multiple circulars, remove obsolete requirements, and reorganise the framework into 11 chapters covering all aspects of stockbroker regulation.

Compliance Eased, Exchanges Made First-Line Regulators

Compliance requirements have been streamlined through measures such as joint inspections, electronic maintenance of books of accounts and rationalised reporting norms. Stock exchanges have been designated as first-line regulators for stockbrokers, with revised norms for reporting non-compliance and submission of financial statements.

The board also approved the rationalisation of criteria for identifying qualified stock brokers, with enhanced supervision focusing on brokers with larger client bases and higher trading volumes.

Debt Issuers To Offer Incentives In Public Issues To Certain Investors

It also allowed debt issuers to offer incentives in public issues to certain categories of investors.

Among other key proposals, the board cleared a recommendation regarding a framework to reduce the compliance burden of companies with large debts by raising the threshold for identifying High Value Debt Listed Entities (HVDLEs) to Rs 5,000 crore from the current Rs 1,000 crore.

Decision on Conflict-of-Interest Framework Deferred

The board reviewed proposals to overhaul norms governing mutual funds and stock brokers, but deferred a decision on a framework requiring senior Sebi officials to disclose their financial assets and liabilities to an independent officer.

IPO norms eased, disclosures made more investor-friendly

Sebi’s board also approved amendments to IPO regulations to address operational challenges around share lock-ins and improve the readability of offer documents. The regulator cleared a technology-enabled mechanism to appropriately mark pledged pre-issue shares as locked-in, easing compliance for issuers and intermediaries, and clarified that shares pledged by non-promoters of IPO-bound companies will be treated as non-transferable during the lock-in period.

To make IPO disclosures more investor-friendly, Sebi decided to replace the need for a separate summary document by requiring an abridged prospectus to be provided at the draft stage itself, along with the DRHP. The abridged prospectus, which is already mandated under the Companies Act, will contain key information and be made accessible through a QR code, allowing investors to quickly assess essential details without navigating lengthy draft offer documents.

This is the fourth board meeting chaired by Sebi chief Tuhin Kanta Pandey, who assumed office on March 1.

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